The research arm of a top crypto exchange is warning traders to keep an eye on open interest (OI) while trading altcoins.
In its latest Alpha research findings, Bitfinex says that a drop off in OI has helped many altcoins, like SUI and AAVE, rally tremendously.
“We believe that a risk-on sentiment and the ability to move altcoins quite easily due to the reduction in altcoin OI is partly responsible for altcoins like SUI and AAVE being up 100 percent since their respective lows in August and September.
The concerning development in the altcoin market however is that OI has made a higher high to $11.48 billion relative to the August 19th high of $10.74 billion. This comes despite the fact that the OTHERS index (which excludes the top 10 coins by market capitalization) has not made higher highs.”
With Bitcoin (BTC) leading a market-wide rally, Bitfinex warns that a consolidation period is likely on its way after a failed breach of the $65,000 level.
“We advocate taking a cautionary approach after the 22 percent rally we have seen in BTC. It is now entirely possible that the price could form a new range near current prices and consolidate for a period, as we have seen following similar previous price rallies which have been initially prompted by spot buying, but then is followed by perpetual and futures markets activity…”
As a result, Bitfinex is predicting a “correction” for the altcoin markets, defined by Bitfinex as any altcoins outside of the top 10 by market cap.
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